The Dynamics of Housing Demand in the Philippines: Income and Lifecycle Effects

This paper examines the housing consumption pattern of Philippine households. Two basic issues are examined: one, how is housing demand associated with income and demographic changes? and two, does the housing consumption pattern of households suggest the presence of significant housing market imperfections or capital market imperfections in the country? The results show that while income is a major factor in housing demand, other factors such as lifecycle, price of housing, and financing availability also affect demand. Estimates of income elasticity show that the demand for housing is highly responsive to a change in income, but housing adjustments are confined to basic improvements in housing facilities with minimal change on tenure. The path toward acceptable housing is constrained due to several factors: first, the ratio of unit housing cost to income is rapidly rising; second, there are few low-cost alternatives to homeownership in the formal market; and third, innovative housing finance is limited and the microfinance schemes available suffer from liquidity problems and bureaucratic delays. Thus, government has to address the problems of housing in a broader context. The issues are not only confined in providing households income transfers through subsidies or in giving access to housing and security of tenure but also in looking at the larger issue of urban development.